Officials: Health Reform to Control Costs, but Isn’t Cure-All for Deficit

Health-care legislation will effectively contain costs, according to administration officials interviewed at the Journal’s CEO Council, but top economic adviser Christina Romer said it will take more than health-care overhaul and a growing economy to bring down the deficit.

Health and Human Services Secretary Kathleen Sebelius, who expects a Senate bill on the floor and aCongressional Budget Office score this week, said the legislation is likely to reduce budget costs by 2019. “I think everybody is focused on cost containment,” she said. “It’s fair to say, what happens if we do nothing?” She noted that without any action, health-care costs would increase 126% over the next 10 years.

“When I look at the long-run budget … the number one [problem] is rising health-care costs,” said Romer, adding that the administration has been focused on controlling costs from the beginning.

Last night, White House Chief of Staff Rahm Emanuel said that Barack Obama is the first president to look at health reform and give equal weight to expanding coverage and controlling costs.

Sebellius said the bulk of the money to pay for health reform is already money being spent in the system, and both she and Romer pointed to the excise tax on so-called Cadillac health plans as the most effective cost control in the legislation. But chief executives at the conference worried that cost controls may not materialize.

Myron E. Ullman III, CEO of J. C. Penney Company, Inc., expressed concerns that a tax on Cadillac plans would just result in a shift away from those plans. He indicated those taxes may not raise revenue if businesses move compensation away from those more expensive plans.

Romer said that even if the move fails to increase revenue, it would be a net positive for the system. “If it makes firms negotiate harder and look for reasonable priced plans. That’s what we’re looking for,” she said.

But the chairman of the president’s Council of Economic Advisors admitted that health reform and a growing economy isn’t enough to bring down the deficit. She did mention one other place that revenue could come from: letting the Bush tax cuts expire.

Though nothing will help the deficit as much as a growing economy, she said.